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In: Economics

What has happened to income inequality in the last few decades ?

What has happened to income inequality in the last few decades ?

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Expert Solution

In simple words, income inequality refers to the distribution of income in an uneven manner among the total population. When there is a high level of income inequality, a small percentage of the population earn a high portion of the total income.

The US experienced a relatively low income inequality between 1937-1967. However, in the USA, income inequality has been steadily rising since the 1970s. In other words, the % of total income earned by high-income households has increased over the last few decades. Currently, US is positioned in the 30th percentile in income inequality globally. This means more than 70% of countries have more income equality than the US. According to a report of CBO, in the period between 1979 and 2007, after-tax income of the top 1% households increased by 275%, whereas the after-tax income of the next 19% grew only by  65%. Moreover, the after-tax income of the next 60% of the population increased only by 40% whereas the same of the bottom 20% grew only by only 18%.


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